Fed Gave Banks Eye-Popping Emergency Loans, Without Telling Congress

An anonymous reader writes with this excerpt: "The Fed didn't tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn't mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed's below-market rates, Bloomberg Markets magazine reports in its January issue."

Comments

World's dumbest loanshark

[John3]

Jon Stewart covered this topic quite well the other day. So essentially we (US Treasury) loaned the banks money at 0.01% and then they loaned us (US Treasury) the money back at a higher rate. WTF?

Re:Capitalism

[istartedi]

You sort of beat me to it, but I think the best word for what we have is simply cronyism. That gets you down to one -ism that describes it all. It applies mostly to corporations, but if you use the word cronymism it covers union corruption too. Anybody who opposes cronyism should be just as upset about the way bondholders were screwed in favor of unions during the GM bankruptcy as they are about the way banks are profiting.

Re:Basic macroeconomics

[John3]

--soapbox--

I'm speaking strictly from personal experience with my small business (hardware store employing 30 people) and what I hear from other small business owners both locally and in the hardware industry around the country, but the banks don't appear to be loaning anyone anything lately. Even with the Fed pumping money into the system they still aren't willing to loan it out to small businesses or individuals. Money is going to money, and that's doing nothing to help the businesses and individuals that are struggling.

--end-soapbox--

Re:just like communism...

[Required Snark]

You raise a very interesting point. I have observed that the Russia (the former Soviet Union) and the USA have followed a similar course since the fall of the Eastern Bloc. Both systems have been taken over by corrupt and inefficient economic elites. The difference is that in Russia they admit what has happened, and explicitly refer to the "plutocrats" when talking about their economic situation. In the USA no one has admitted that our economy is run by a clique of incompetent self serving thieves that are enriching themselves at the expense of the US and world economy. Only with the emergence of the Occupy Wall Street movement has there been any public discourse about how intrinsically corrupt our economy has become.

Here is an interesting post on Reddit from someone inside the hedge fund industry about how the game is really rigged. It's an insiders view of how a segment of the corrupt economic system runs.

Furthermore, you have absolutely no chance in terms of access to the best services. Hedge funds have a direct line to investment bank's institutional brokerage teams - these are the guys that spend day and night sucking up to hedge funds, trying to get them the best deals at the cheapest rates. This means that while you're buying stocks and bonds, hedge funds are getting special rights, warrants, sweetheart deals, private placement deals, options, bigger discounts on bonds, and much better bulk commission rates and lower spreads on stocks. If you're paying 4.25$ for a 4.15$ stock, they are paying something like 4.16$. And they are eating alive your profits because when the stock goes up to $4.30, they can activate another warrant to purchase 20m shares at $4.25, diluting the value of your shares.

Next, you lack information and exposure. You have no idea what is going on in the market besides what you see on the news - while hedge funds have analysts working around the clock and a bunch of service providers who give minute-by-minute analysis of their portfolio opportunities and weaknesses in all markets with exposures to nearly everything. Meaning, if there is an opportunity in the real estate market (i.e. legislation), it might take you weeks to get in - hedge funds will have gotten in the minute the legislation was passed. Furthermore, when IPOs come out for companies, hedge funds get top billing on the primary market shares - which means investment banks are selling directly to them. Once the secondary market becomes available, hedge funds are up 15-20% on these investments, sometimes within hours.

Finally, you have no capital compared to these hedge funds. The people who invest in these hedge funds are not just the 1%, they are the 0.1%. These are the guys with 500million dollar bank accounts and the ability to do whatever the fuck they want. Hedge funds know this, and they invest without having to care about whether their clients can pay the rent or send their kids to college. All of that is irrelevant. Their sole purpose is to earn money, not to mitigate risk.

http://www.reddit.com/r/occupywallstreet/comments/muqzv/wall_of_text_i_work_in_wall_street_and_work_in